Performance

Commentary

As of October 31, 2017

Month in review

The JPMorgan Global Allocation Fund (I Class Shares) returned 1.6% in October versus the composite benchmark returns of 1.0%.

Developed market central banks remained in focus throughout the month as several continued to move away from their highly accommodative monetary policy stances. The European Central Bank announced a well-signaled cut in the pace of its government bond purchases. The Bank of England continued to flag a coming hike in its policy rate. The Federal Reserve (Fed) left rates unchanged, in line with expectations, while markets digested the potential impact of a new Fed chair.

Economic data released in October showed continued strong growth for the global economy. Relative to expectations, some of the best news came from the U.S., which produced a string of favorable surprises culminating in a preliminary reading for third-quarter gross domestic product of 3.0%.

Looking ahead

An environment of healthy and broad economic growth, decent corporate earnings and still-accommodative monetary policy supports our continued pro-risk stance. We note a move to late cycle in the U.S., but despite modestly expensive valuations, we see room for equity outperformance looking forward. Correlations across equity markets continue to fall suggesting an increased benefit of diversification and further support for our broad regional exposure.

We continue to focus our risk in global equities, and maintain an increased exposure to both international developed and emerging markets. In particular, Japan looks attractive with improving earnings revision ratios and corporate profits alongside attractive valuations relative to other developed markets. In emerging markets, strong global growth, rising commodity prices, and a stable-to-weaker dollar all remain supportive of the asset class. Given the expectation for potential future market volatility, we hold some of our global equity exposure in call options as a way to manage risk, but still capture potential market gains.

We continue to believe that credit will be the most attractive area within fixed income. While we have maintained a sizeable allocation to U.S. high yield in recent history, the yield opportunity has lessened due to stabilizing commodity prices, declining default rates and a stable macro backdrop. Given current valuations, we prefer to diversify our credit exposure by further reducing U.S. high yield and adding to emerging markets debt. Additionally, we’ve initiated an allocation to short-duration agency mortgages as a way to earn additional income relative to what we can earn on similar short-duration U.S. Treasuries.

The following risks could cause the fund to lose money or perform more poorly than other investments. For more complete risk information, see the prospectus.
There may be additional fees or expenses associated with investing in a Fund of Funds strategy.
International investing has a greater degree of risk and increased volatility due to political and economic instability of some overseas markets. Changes in currency exchange rates and different accounting and taxation policies outside the U.S. can affect returns.

Total return assumes reinvestment of income.
The top 10 holdings listed reflect only the Fund's long-term investments. Short-term investments are excluded. Holdings are subject to change. The holdings listed should not be considered recommendations to purchase or sell a particular security. Each individual security is calculated as a percentage of the aggregate market value of the securities held in the Fund and does not include the use of derivative positions, where applicable.

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